Who Killed Nokia? Nokia Did

Despite being an exemplar of strategic agility, the fearful emotional climate prevailing at Nokia during the rise of the iPhone froze coordination between top and middle managers terrified of losing status and resources from management. The company was wounded before the battle began.

Nokia’s fall from the top of the smartphone pyramid is typically put down to three factors by executives who attempt to explain it: 1) that Nokia was technically inferior to Apple, 2) that the company was complacent and 3) that its leaders didn’t see the disruptive iPhone coming.

We argue that it was none of the above. As we have previously asserted, Nokia lost the smartphone battle because divergent shared fears among the company’s middle and top managers led to company-wide inertia that left it powerless to respond to Apple’s game changing device.

In a recent paper, we dug deeper into why such fear was so prevalent. Based on the findings of an in-depth investigation and 76 interviews with top and middle managers, engineers and external experts, we find that this organisational fear was grounded in a culture of temperamental leaders and frightened middle managers, scared of telling the truth.

Deer in the headlights

The fear that froze the company came from two places. First, the company’s top managers had a terrifying reputation, which was widely shared by middle managers—individuals who typically had titles of Vice President or Director in Nokia. We were struck by the descriptions of some members of Nokia’s board and top management as “extremely temperamental” who regularly shouted at people “at the top of their lungs”. One consultant told us it was thus very difficult to tell them things they didn’t want to hear. Threats of firings or demotions were commonplace.

Secondly, top managers were afraid of the external environment and not meeting their quarterly targets, given Nokia’s high task and performance focus, which also impacted how they treated middle managers. Although they realised that Nokia needed a better operating system for its phones to match Apple’s iOS, they knew it would take several years to develop, but were afraid to publicly acknowledge the inferiority of Symbian, their operating system at the time, for fear of appearing defeatist to external investors, suppliers, and customers and thus losing them quickly. “It takes years to make a new operating system. That’s why we had to keep the faith with Symbian,” said one top manager. Nobody wanted to be the bearer of bad news. However, top managers also invested in developing new technological platforms that they believe could match the iPhone platform in the medium term.

“Top management was directly lied to”

Top managers thus made middle managers afraid of disappointing them—by intimating that they were not ambitious enough to meet top managers’ stretched goals. One middle manager suggested to a colleague that he challenged a top manager’s decision, but his colleague said “that he didn’t have the courage; he had a family and small children”.

Fearing the reactions of top managers, middle managers remained silent or provided optimistic, filtered information. One middle manager told us “the information did not flow upwards. Top management was directly lied to…I remember examples when you had a chart and the supervisor told you to move the data points to the right [to give a better impression]. Then your supervisor went to present it to the higher-level executives. There were situations where everybody knew things were going wrong, but we were thinking, “Why tell top managers about this? It won’t make things any better.” We discussed this kind of choice openly.”

This shared fear was exacerbated by a culture of status inside Nokia that made everyone want to hold onto power for fear of resources being allocated elsewhere or being demoted and cast aside if they delivered bad news or showing that they were not bold or ambitious enough to undertake challenging assignments.

Innovation impotence

The high external fear among top managers and high internal fear among middle managers led to a decoupling of perceptions between the two groups of top and middle managers about how quickly Nokia could launch a new smartphone and develop advanced software to match the iPhone. Given the optimistic signals coming from the middle managers, top managers had no qualms about pushing them harder to catch up with Apple—after all, top managers were only stretching targets. Fearful that Nokia would lose its world dominance and post weak financial results, top managers exerted pressure on middle managers to deliver a touchscreen phone quickly. They acknowledged this in interviews with us. “The pressure we put on the Symbian software organisation was insane, because the commercial realities were so pressing. You must have something to sell” said one top manager.

A leader from the MeeGo organisation, which was set to be the successor technological platform to Symbian said, “we spoke of a delay of at least six months, if not a year. But top managers said ‘let’s go, you have to run faster.’”

Beyond verbal pressure, top managers also applied pressure for faster performance in personnel selection. They later admitted to us that they favoured new blood who displayed a “can do” attitude.

This led middle managers to over promise and under deliver. One middle manager told us that “you can get resources by promising something earlier, or promising a lot. It’s sales work.” This was made worse by the lack of technical competence among top managers, which influenced how they could assess technological limitations during goal setting.

As one middle manager pointed out to us, at Apple the top managers are engineers. “We make everything into a business case and use figures to prove what’s good, whereas Apple is engineer-driven.” Top managers acknowledged to us that “there was no real software competence in the top management team”.

The final blow

Nokia therefore ended up allocating disproportionate attention and resources to the development of new phone devices for short-term market demands at the expense of developing the operating system required to compete with Apple.

The quality of Nokia’s high-end phones thus gradually declined. In 2007, Nokia launched the N95 smartphone, which had full music features, GPS navigation, a large screen (albeit not a touch screen) and full internet browsing capability. Software compromises were accepted to get it ready on time. It was a success, but serious quality problems soon emerged.

In 2008, Nokia launched its first touchscreen phone, the 5800, at a lower price point than the iPhone. It was a commercial success but it was about “one and a half years late” because of software development problems. In 2009, the N97 was launched to overthrow the iPhone, but one top manager admitted the phone was “a total fiasco in terms of the quality of the product.”

In 2010 came the purported “iPhone killer” with a touchscreen, one year later than planned, but it underperformed in usability and failed to match up to the sleek competition of iOS and Android. A new CEO—Stephen Elop--hired later that year decided that Nokia would be better off buying software from elsewhere and formed an alliance with Microsoft in 2011. As we know, this move accelerated the company’s decline and Microsoft went on to acquire Nokia’s phone business in 2013. The market value of Nokia declined by about 90% in just six years, hovering around 100 billion US dollars.

Despite its enormous R&D firepower, its technical prowess and foresight — Nokia’s patents still generated about US$600 million a year paid by its thriving rivals like Apple and Samsung — Nokia’s ultimate fall can be put down to internal politics. In short, Nokia people weakened Nokia people and thus made the company increasingly vulnerable to competitive forces. When fear permeated all levels, the lower rungs of the organisation turned inward to protect resources, themselves and their units, giving little away, fearing harm to their personal careers. Top managers failed to motivate the middle managers with their heavy-handed approaches and they were in the dark with what was really going on.

While modest fear might be healthy for motivation, using it indiscriminately can be like overusing a drug, which risks generating harmful side effects. To reduce this risk, leaders should be attuned to the varied emotions of the collective. As Huy pointed out in other research, those able to identify varied collective emotions are seen as effective transformational leaders. Leaders can develop a collective emotional capability in their organsations. Fear can only be a useful motivator if management can provide workers with the means to address these fears. Nokia’s top managers should have encouraged and role modeled more authentic and psychologically safe dialogue, internal coordination and feedback mechanisms to understand the true emotional picture in the organisation. They might then have been able to better gauge what was possible and what was not, and most importantly, what to do about it.

What other companies should take away from Nokia’s decline is not just “don’t be complacent,” but try to compete instead. For Nokia, this means knowing what kinds of innovations competitors are investing in to compete better. Like Nokia, BlackBerry also stumbled recently. This is a good look at what companies can learn from their mistakes - http://www.competing.com/2013/10/blackberry-company-b-and-forensic-strategy/

i am not sure you have known about the culture of Nokia or not but shouting the lungs out by Manager is not a correct representation , you can put whatever theory you have but nokia was mainly killed by Stephen Elop and it was Microsoft who was behind this , and unluckily Nokia bboard members were blind enough to see the threat but we engineers have seen it . there is no point explaining it to you as you will not agree on it but i would say a nice hyped article ....

You missed another crucial factor which was that during this time the company was trying to re-invent itself as a services organisation. This completely de-focussed and disrupted the traditional processes and thinking of the box-shifters in the organisation, and instead of focussing on maintaining & developing the core platform, focussed instead on the integration of music, maps, games, and messaging services, further fragmenting the Symbian operating system between devices, and thus stifling growth and innovation on the core.

Some members of the Exec board would yell at the top of their lungs and would run people out of jobs but I remember the people who reported into them also saying that there was a reason for this behavior. That said the majority of the Exec board were not like this and at every board in Nokia a reasoned argument usually won or a reasoned consensus emerged. I've worked with several boards and did not see Nokia's as dysfunctional.

For middle management misrepresenting data to the upper managers who who would report to the board. It was also not unusual for the middle managers to notify the board member that his/her organization reported into to say that the information was "managed" to create a desired outcome. Often with forecasts or projections there is "optimism" in the pitch. What we haven't heard is middle management lying about activities with the intent to change financial results (see Volkswagon).

Nokia's management worked to correct Symbian (an independent organisation that was funded almost exclusively by Nokia). There were strategic mistakes made (s90 killed, S60/s80 merged...) but there was honest effort to make s60 viable. The 5800 was late but that's also why it wasn't a flagship.

Need to go back on this one and look at when revenue and profit started to tank and if/when it clearly accelerated. One of those intersections was when Elop proclaimed Symbian dead in 2 years.

For a very long time, Nokia was criticized by the investor community for having management that was “too Finnish”. The argument was that the Finns did not understand the US culture and as a result, the lack of success in the
US market was due to a large hole in its product portfolio that was unique to the US. Nokia was diligent in “listening” to the criticism and began to place more and more “non-Finns” in executive management roles. This of course was the beginning of the end.

At the time, one of Nokia’s Core Values was “Continuous Learning”.
Within this concept, the organization empowered individuals to take risks and learn from mistakes. This value was never learned or adapted by the individuals placed in leadership roles.

Another core value was “Respect for the Individual”. This concept would allow for healthy debates and even heated discussions regarding projects, concepts, business direction, etc. etc. The debates and arguments were always about business and never mean to intimidate or bully individuals.

What the article describes are typical American Corporate behavior and sadly, this is what contributed to the demise. Too many US trained corporate managers who never truly understood or adapted to Nokia’s Values.

Weak article by someone who does not know, nor understands Nokia. The simple truth is that Nokia was destroyed by the Trojan horse Elop, so that m$ could buy the handsets division for a low price. No one will ever know what was promissed to shareholders, that they were so blinded and did not kick Elop out when it became obvious that his only role is to kill the Nokia share's price.

Also instead of dictating to these aired business how to align, Nokia was too nice and allowed them all to develop their own organisations and strategy, thus totally failing to deliver this"one services" vision.

As I mentioned in my earlier comment, people in different organizations within Nokia definitely had very different experiences. My view from my own experience, pre-Elop, was very much as described in this article. I had many experiences that very much mirror the scenarios described here, and I was in a group highly responsible for Nokia's next evolution planning. I can't comment on whether Elop's direction helped or hurt things from there, but from my view, the issues described in this article were already deep rooted and inherited by Elop.

To try to find a single cause is not going to do it justice as there were (as often is the case) a multitude of factors.

I joined Nokia in 2006, coming in from marketing in the FMCG industry. Within
6 months, I was sure of two things: I would not last 10 years in this organization, as I did in the previous and the company would not, in the long term succeed.

The first, because it did not value people, as such. Clearly people (at
Nokia) where just assets you could very well do as you pleased with.

The second, because they were the most exciting brand I have ever worked on, but the most poorly managed brand I have ever worked on.

Besides all the things you've pointed out, which might be true but I did not experience myself, there is a more fundamental issue (which is true to many tech companies). That's the fact that all of these companies are driven by engineers who think "tech first", rather than brand/consumer first.

There was a time when the market was "nascent". At that point, all you need is the right price & product with an incredible supply chain and you can wipe out your competition. Nokia did that brilliantly. And grew as a result.

But then the market matures. And thinking "tech" is no longer enough - you need the basics AND something else, which is brand strength. The companies who have been selling shampoo and instant soup have been there and found that you then need to evolve and focus on the consumer needs. On what your brand is all about.

Nokia never truly understood what a brand was all about. It spoke all the right "lingo" (top to bottom), but people's understanding was just not there.
It was like discussing Africa, without ever having been there - all of the myth and very little of the true facts.

It was quite shocking for me, coming in in 2006 (way before the iPhone) to see that you had two camps in Nokia: those who'd only ever know Nokia as a company/employer and those who came from outside (Coke, Nike, Unilever, Nestlé, Ad Agencies, etc). It was interesting how no matter where you came from, if you were of "non-Nokia" origin, you ALL saw the same issues. And it was shocking how blind the top was - irrespecutful of the information flow and fears.

Personally, I know from first hand account of some of the debate with the likes of Ansi. And how he crushed people back, to the point that they left the company.

The same greatness that created the business (the likes of Ansi) was not suited to continue to grow it. But they failed to recognise that. There was a lot of arrogance internally too. Clearly. But it was a mix of factors, not as simple as a) or b).

My research indicates that the senior management of Nokia were alerted by its competitive intelligence unit in advance about the new iPhone coming in, around 2 years before its launch but failed to accelerate the development of a good answer. By that they brought to the end of Nokia.

Anyone remember a Polish guy who used the nom de guerre "JPZR"?
He was an employee of Nokia Core Networks but was also a fan of the Windows phones, way back in the early 2000s.

In both the Register and on internal Nokia forums, he would write that Nokia had missed the boat on this feature, that feature and so on. He highlighted many of the company's faults that are now coming to light. Unfortunately, while his message was spot-on, his delivery method was way-off: He used to rant and rave and use excessive swear words in his writings "F-ing Nokia this, f-ing Nokia that..." and so on. So he ended up being derided and ridiculed.

One serious flaw of Nokia was the milestone bonus scheme. When a project hit a milestone, it had to have so much % of the project completed. Project members were paid a % of their salary as a bonus. Naturally, figures were twisted and concessions made to make the project "meet" the required progress. As the project seemingly advanced, the deficiencies were compounded and as the final milestone was reached, there were often too many problems to allow shipping a working a product.

I worked at Nokia for 3 years before the iPhone era. The characterization of the Nokia culture in this article is completely out of line with my experience. Nokia managers had great respect for the individuals and valued information good or bad coming from the rank and file as long as it was based on solid data and reasoning.

Nokia's problem was that it had a completely inflexible global platform and the processes that went with it. Nokia was a like a very large ship that
took forever to change direction. Nokia could only do as well as they could
forecast trends and the market environment 18 months out. This is completely different than how Samsung operates.

The iphone and touch screen devices were a big disruption in the market.
Nokia was a really efficient machine, but efficient at producing the wrong type of product. Their internal structure and way of operating made it very hard to respond to the iPhone.

Then Elop was the final nail in the coffin with his decision to bet the company on Microsoft's lousy platform. Had Elop chosen Android.....the situation could have been very different.

I can shorten all this text and analyzing into few words everybody already
knows: because of Elop. Elop killed MeeGo, Elop killed Meltemi, Elop chose an OS that was inferior, lacked features and was even more late in the ecosystem war than MeeGo ever was and went all-in with it. All that money and R&D muscle from Microsoft and the global market share is still hovering around 2%. I claim that even Symbian would have more market share today if it were alive and patched. Nokia's HW was definitely up to par with competition so the only problem is/was the OS and ecosystem. And lets face it, Microsoft is not exactly the most hip and loved brand in the world today.

The comments against the author by many ex-nokian does not agree with author in anyway the reason is simple they are just not true , yeah board memebr were blind enough to select Elop and that is a job of Board member to select someone capablae enough, a engineer has a different prospective and he is more logical than managers but that does not mean that there is an atmosphere of threat and no respect inside company , infact it is an fact that even after left Nokia for so long people still remembrer the core values and miss the workplace , Only a Nokian can tell it whether the article is true picture of Nokia or not

Becoming service organization was not a bad decision at all , the information given by managers to its superior was correct , all the services which Nokia was brininging to a mobile ecosystem is now a money making machine for apple and google , Nokia was not successful in converging the services and mobile together becasue it was a way early into the market with those servcies and which company does not make a mistake in implementing something new, but that does not mean that there was an atnosphere of threat or disrespect in company .

The whole point of wrting comments that the article is not true enough becasue most of people have their best time of life inside Nokia and the one has to be Nokian to see what it was like working in Nokia , the innovation , the passion and above all respect for each other atleast that is something which i cannot forget and just to end , i still remember the core values of Nokia even after leaving the company 4 years ago.
P= "Passion for Inovation "
A="Achieving Together"
V="Very Human"
E="Engaging you" .

I wonder whether any of those critical commenters above have read the original research article by the authors. The findings are the result of multiple comprehensive interviews with some of Nokia's top and middle managers and other people who were somehow involved with Nokia during the study period. The paper was published in one of the top business and management journals. I' not saying this makes their findings absolutely true, but I think they are more reliable than ex-Nokians personal experiences.

I can't understand why several people in this group blame Steven Elop for Nokia's decline. He joined Nokia only in late 2010, when the smartphone world was already ruled by iOS and Android (with Blackberry also fading). Clearly, Nokia's decline must be attributed to decisions made prior to 2010. Even if Nokia had chosen to build Android phones post 2010, does anyone seriously believe that they could have competed with the superior cost position of the Asian manufacturers?

Big companies are complex systems. There are many things happening and outcomes are never caused by a single factor only. Our research focused on showing how the fear dynamic influenced Nokia’s failure to respond to the iPhone threat. Many of the commentators have described additional important aspects of this process. They all worked together causing the outcome. We focused on describing the fear dynamic because it is the least well understood area of organisational failure by both managers and academics.

Not all people pay attention to or notice emotional dynamics in organizations. Experimental research has shown that people vary to a great extent in how accurately they recognize others’ emotions and in how well they are able to consider things from others’ points of view. Hence, it is natural that not all people inside Nokia were aware of the fear dynamics that we described – and that’s the reason why emotions are often difficult to manage and lead to unexpected consequences.

There are of course differences between units in organizations. We did not investigate the emotional climate in Nokia’s marketing department, for example.

The ultimate purpose of our research is to help other companies avoid harmful emotional dynamics. When I taught the case of Nokia to hundreds of senior executives at INSEAD, many of them privately told me that the same harmful fear climate we described at Nokia also existed in their companies and was harming their companies' performance. After hearing the extreme story of Nokia, they are able to do something about the climate in their companies and therefore perform better.

Nicely analyzed case - however, this focuses on utter incompetence of Top Management, who can be compared to second or third generation kins of entrepreneurs who do not have any grasp of the market or product and who work on their own whims and fancies. Is it possible that the entire top management was alarmingly aloof from its product manufacturing capability (one it used to pioneer at one point in time)? While the top management is responsible for strategic direction, its the middle management which forms a crux of execution. While complacency of Top management might have been the biggest cause, however, lethargy of middle management to 'work', was a cultural shift from being a market leader to a laggard would have been a challenge (one can argue again that this trickles from the top). The latter part of your analysis does consider the EQ of top management to aptly consider the undertone of culture; which could have made Nokia more nimble and agile to counter the threat. Though 'fear' can be partially blamed, accepting the responsibility of changing circumstances and modifying work culture could be a bigger issue in such a set up.

Fear based management is perceived as an easier way to control employees and the climate within the organization - some form of fear as a motivating factor is good but needs to be complemented by other factors and not a dominant force.

Had Nokia succeeded the crippling impact of fear would have been masked. Hence why it continuous to be a source of power for some leaders, especially when a business is competitively successful.

I joined late, in 2011, and by the time we got to 2013 there was a real "Truman Show" feeling in Nokia House, Espoo. You had to be upbeat, criticising anything even in the company's internal media earned you some serious flack. By contrast to the desired image, my worst memory of those last months were the "mitigation meetings" for the launch of the Lumia 930, we knew it had big heat dissipation problems and all the statements we had to use in public were essentially blaming the consumer's use of the device - as if customers (and, for that matter, journalists and bloggers) were incaple of comparing the phone to similar models from other brands. There was serious denial about how bad things were.

I worked at Nokia for 3 years before the iPhone era. The characterization of the Nokia culture in this article is completely out of line with my experience. Nokia managers had great respect for the individuals and valued information good or bad coming from the rank and file as long as it was based on solid data and reasoning.

Nokia's problem was that it had a completely inflexible global platform and the processes that went with it. Nokia was a like a very large ship that
took forever to change direction. Nokia could only do as well as they could
forecast trends and the market environment 18 months out. This is completely different than how Samsung operates.

The iphone and touch screen devices were a big disruption in the market.
Nokia was a really efficient machine, but efficient at producing the wrong type of product. Their internal structure and way of operating made it very hard to respond to the iPhone.

When demonstrating a planning product (IBM) to Nokia in the late 90's I was struck by the total arrogance of management. The typical comments were "we are Nokia and don't need anything new", "We have software engineers that can do that for less". He arrogance was profound, the atmosphere in the conference was toxic and I knew that their end was just around the corner. I found this to be the same attitude demonstrated by Oracle at the same time. Is Oracle next?

The analysis of the fear can explain one part of the complex issue. I have experience that the fear can be the first force which drives an organization. And when it's the first force, it leads inevitably to worse results. When fear is a dominant force, it quickly grows exponentially. Only the staff who plays the fear game or who is denial, can stay.

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